I have changed it to synaptics since it seems to have something to do
with my Touchpad according to Xorg.0.log and it never happens for me
with USB mouse. Can anyone confirm that this issue is Touchpad related?

@climatewarrior
Your issue seems to be a driver problem listed under Bug #108056.

** Changed in: xserver-xorg-input-synaptics (Ubuntu)
Sourcepackagename: xorg => xserver-xorg-input-synaptics

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[Gutsy] desktop and keyboard freezes while mouse is moveable
https://bugs.launchpad.net/bugs/138094
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